How will the Grab-Uber deal affect ComfortDelGro?

How will the Grab-Uber deal affect ComfortDelGro?

SINGAPORE: The share price of ComfortDelGro, which has a strategic alliance with Uber, rose as much as 5 per cent on Monday (Mar 26) after Grab confirmed the acquisition of Uber’s operations in Southeast Asia.

ComfortDelGro rose to as high as S$2.09 before closing up 2.5 per cent at S$2.04.

The Grab-Uber merger could either erode ComfortDelGro’s advantage in the ride-booking industry, or help the taxi company benefit from rationalisation of competition, said industry watchers.

The first outcome of the deal would be that Grab becomes the only third-party ride-hailing service provider in Singapore, which would allow it to control all ride bookings, OCBC said in a note on Monday. 

This would further erode ComfortDelGro’s competitive advantage of having scale in the ride-booking industry, said Mr Eugene Chua, investment analyst at OCBC Investment Research.

Alternatively, the deal could place Grab in a monopolistic position, allowing it to have control in raising car rental rates, reducing subsidies and changing fare structures, Mr Chua said. 

This would be beneficial for ComfortDelGro, he added.

Maybank Kim Eng and Credit Suisse also said in their reports earlier this month before the Grab-Uber merger was announced that ComfortDelGro would benefit from a rationalisation of competition.

The Grab-Uber deal comes three months after ComfortDelGro and Uber entered into an agreement to form a joint venture, in which the taxi company would acquire a 51 per cent stake in Uber's wholly owned subsidiary Lion City Holdings for S$642 million.

The collaboration between the two also led to the launch of UberFlash in January. The companies had sought permission from the regulators to launch UberFlash, but the overall regulatory clearance for the joint venture is still ongoing.

When asked on Monday how the Grab-Uber deal would affect ComfortDelGro’s alliance with Uber, ComfortDelGro did not elaborate, saying only that it is “reviewing all aspects of the proposed tie-up with Uber Technologies which is currently under review by the Competition Commission of Singapore”.

Source: CNA/aj

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